German government sees growth decelerating

The German government cut its growth forecast for 2019 and 2020, Reuters reported on Wednesday.

The internal government report cited by Reuters refers to weaker than anticipated exports and reduced state consumption. The conclusion is a subdued growth projection of 1,8% for 2019, down from original estimates of 2,3%.

Germany is the biggest economy in the Eurozone and tends to be treated as a proxy for the Eurozone. 2019 presents a number of political risks to the German economy, including Brexit, Argentina, and Turkey.

One in five jobs in Germany depends on exports.

Still, Germany expects a surge in public spending as prolonged government negotiations deferred federal expenditure from 2018 to 2019.

Given full employment, Germany also projects a real wage increase of 3% in 2019,, to be followed by 3,1% in 2020.

The combination of public spending and household demand plays a balancing role in an economy heavily depended on exports. Inflation is projected to reach 1,9% in 2018 and reach the European Central Bank’s 2% target in 2019.